Impact – Wealth Management


Don’t Put All Your Eggs in One Basket

When it comes to managing investments, “don’t put all your eggs in one basket” is probably one of the oldest and arguably wisest principles you should apply.  But it’s also perhaps the most misunderstood.

“Don’t put all your eggs in one basket” usually refers to diversification.  A portfolio that isn’t properly diversified can lead to big losses that could be nearly impossible to come back from.  Diversification is absolutely critical for long-term investors. 

Many people believe that having multiple financial advisors is the key to better diversification and reducing risk, but the truth is that having multiple advisors can actually lead to less diversification, more risk and higher fees. Consolidating your investments to one financial advisor could improve your diversification, lower your risk and reduce your expenses. 

Let me explain.

The Diversification Dilemma

One of the primary reasons clients opt for multiple financial advisors is the desire to diversify their investments. However, when advisors are not working together, it often means that no one really knows what is going on with your portfolio.

There is a risk of duplicating and overlapping investment strategies. And the risk of this goes up with every advisor that you parcel your portfolio off to. Consolidating investments with a single advisor lets that advisor see your whole portfolio picture.  This can mean a more comprehensive approach to diversification and give you confidence that your portfolio is properly allocated across various asset classes and investment strategies.

Lower Overall Fees

Having multiple financial advisors often means paying multiple sets of fees. Each advisor typically charges a percentage of the assets they manage. That percentage is usually higher for smaller portfolios and lower for larger portfolios.  As a result, the more advisors you have, the higher your overall fees could be.

Consolidating your investments with a flat-fee, fee-only financial advisor could potentially reduce fees significantly. Flat-fee advisors charge a fixed fee that doesn’t rise and fall with the value of your portfolio.  If your portfolio is over $400,000 then a flat fee could save you thousands of dollars each year in fees. (Learn more about how financial advisors charge and what you should be paying here.)

Holistic Financial Planning

At Impact, we provide comprehensive financial planning services beyond just investment management. By consolidating your investments with an advisor who focuses on all aspects of financial planning, you gain access to a broad range of expertise, including retirement planning, tax optimization, estate planning, and more. This holistic approach ensures that all aspects of your financial life are considered, leading to a more integrated and effective wealth management strategy.

Simplified Portfolio Monitoring

Paperwork, paperwork, paperwork!!! Who wants more paperwork? Managing investments with multiple advisors can become complex and time-consuming. Consolidating your investments with a single advisor simplifies the monitoring and tracking of your portfolio and reduces your paperwork! Having a centralized point of contact for all investment-related matters, makes it easier to stay informed and updated on your financial progress. It simplifies the settlement of your estate too!  (Your family will eventually appreciate this.) 

Wrapping It Up

While the idea of not putting all your eggs in one basket is a wise principle, having multiple financial advisors may not be the most effective way to achieve true diversification. Consolidating your investments with a flat-fee, fee-only financial advisor offers numerous benefits, including the potential for enhanced diversification, lower overall fees, holistic financial planning, and simplified portfolio monitoring. Choose a trusted and experienced advisor who will help you make sure that all your eggs are NOT in one basket.

Important Disclosures

The information provided in this blog post is for informational purposes only and should not be considered as financial advice. Before making any investment decisions, it is essential to consult with a qualified financial professional who can assess your individual financial situation and provide personalized guidance. Please be aware that investing involves risks, including the potential loss of principal. Past performance is not indicative of future results. The performance of any investment or strategy mentioned in this blog post may not be suitable for all individuals. Impact Wealth Management is a fee-only registered investment advisor. Our firm is committed to providing transparent and unbiased advice to our clients. We do not receive any commissions or compensation from the sale of financial products. The information is provided for informational purposes only and should not be considered as legal, tax, or financial advice.